Ad revenues may be under pressure in the short term, but ITV is growing non-advertising and digital revenues and has a summer of sport to look forward to, which suggests it can outperform the market again this year.
Shares in ITV rose 9 per cent after a strong set of full-year results, with underlying revenues rising 4 per cent to £2.14bn, and adjusted pre-tax profits surging 24 per cent to £398m. Chief executive Adam Crozier, who is now two years into a five-year transformation plan, cautioned on the advertising outlook, but is still expecting to outperform the market in 2012.
There was strong performance from ITV's digital channels, and further growth in ITV's non-advertising revenues, which rose 11 per cent to £922m and now account for 43 per cent of group revenues. Advertising revenues grew 1 per cent in the period, but a 2 per cent contraction is forecast for the current quarter.
The following quarters should be buoyed by the Olympics and European Football Championships. Indeed, analysts at Strategy Analytics forecast UK advertising will grow 4.2 per cent to $20.9bn (£13.1m) this year - a marked improvement from last year's 1.4 per cent expansion. The bulk of this spend is expected to go towards online advertising, which is predicted to grow 10.6 per cent to $7.6bn. TV advertising is expected to grow just 0.7 per cent.
ITV's online revenues surged 21 per cent in 2011 to £34m, and increased investments in ITV Player and the launches of pay-TV service Pay Player and set-top-box, YouView - a venture between BBC, Channel 4, Channel 5 and ITV - should further drive online revenues this year.
With £20m of cost savings realised, and a further £20m to come through in 2012, profits are set to be lifted, too. Strong cash conversion has also left the group with a net cash position of £45m, for the first time since its incorporation in 2004.
